The present invention concerns managing resources for a manufacturing process and pertains particularly to a method for calculating excess inventory.
Generally, in order to determine excess inventory for a manufacturing process, the industry procedure is to use standard material requirements planning (MRP). For example, six-month consumption requirements for a component part is determined. From this is subtracted the current material on hand balances and on order balances. If the material on hand and on order exceeds six-month requirements that material is considered in excess of requirements.
In this system all materials not using standard material requirements planning (e.g. there are no six-month requirements identified by MRP) are calculated to be 100% in excess. This can result in over-stated excess reported or accrued. That is material that is not truly excess is regarded as excess because the current calculation cannot determine the six-month requirements.
Typical inventory management is performed using spreadsheets with data collected once a month for the previous month. For more than one manufacturing organization, each manufacturing organization manually gathers data for material on hand balances, material on order quantities, direct material dispositions, dispositions against material accruals, de-accruals and material requirements for the next six months. Once the information is collected, each manufacturing organization uses spreadsheet applications to calculate the dollar and quantity excess material exposure for their organization.
One disadvantaged realized by using spreadsheets to determine excess material exposure has been the post reactive review of excess data. Since the spreadsheet applications exist outside of the materials management system all of the data has to be gathered prior to the calculations and analysis occurring. Therefore, excess analysis is performed on a post-monthly basis without the ability to make "real time" decisions regarding excess recovery or prevention.
Excess reporting for each manufacturing organization is typically generated from the spreadsheets used by the manufacturing organization. User access to the spreadsheets is often limited, for example, to excess analysts and financial analysts. Typically, a buyer of parts has access to information about excess inventory only through lists of excess material generated by an excess analyst or a financial analyst. For example, an analyst forwards listings of suspect excess material to buyers monthly for review and feedback. Once the buyers receive their excess listing they review the listing over the course of a month and note which materials are not excess. Excess analysts and/or financial analysts then incorporate the buyer's feedback into their individual spreadsheets and create listing of excess material by product family.
In the past there has existed no method to allow the systematic and controlled exclusion of material from organizational excess calculations. Instead, the excess analysts would remove or reduce dollar amounts in the spreadsheets used to calculate excess to estimate materials that they felt were not truly excess.
Typically, the finance department targets an agreed upon dollar amount for the coming year for materials expected to be disposed of. This is material that could potentially be in excess, obsolete and/or scrapped sometime during the year. An excess/obsolete inventory accrual is established for the inventory in excess and the excess or obsolescence expense recorded.
The finance department then identifies all materials previously accrued that actually have been disposed of, calculates the dollar value, and then balances this dollar amount, per month, to the targeted amount for the year. This process can be very manual and labor intensive especially when data is captured by extracting data from numerous sources before analyzing the data and then loading the data into spread sheets for further processing.
The finance department also is generally responsible to identify the year-to-date dollars spent on obsolescence, and then report this value to management. The year-to-date obsolescence dollars are calculated, for example, by identifying all accrued materials that had actually been disposed of, the dollar amount for materials accrued for but not disposed of, the dollar amount for materials not accrued for but which were disposed of and the dollar amount recovered by selling the material to another business or by returning it to the vendor. This process is typically very manual and labor intensive. The data is captured by extracting data from numerous sources, analyzing the data and then loading the data into spread sheets for further processing.
Tracking excess inventory as described above has several disadvantages. For example, there is uncontrolled access to confidential financial data. Also when manufacturing organization specific methods are used for calculating excess inventory it is difficult to accurately summarize the total excess inventory. There is also a high risk of the corruption of manufacturing organization specific data. The processes for gathering the necessary data for managing local excess inventory has been manually intensive. There has been no systematic audit tracking of excess inventory. There has also been post reactive review of excess inventory so that no proactive measure could be taken on inventory. There is also a lengthy processing time for loading manufacturing organization data in spreadsheets for excess calculations.